#deficit-risk

#deficit-risk

In Gaza, our suffering has come not only from the political war between Hamas and Israel but also from the economic war that we have been living with since October 7, 2023.

Credit cards can be very dangerous from a financial well-being perspective, if used irresponsibly. The temptation to use one to fund a big holiday or a new sofa that you can't afford can be seriously tempting.

Tariffs are generating tens of billions of dollars in revenue for the federal government. In the first five months of the fiscal year, the government raised $151 billion from tariffs, nearly four times as much as during the same period the previous year.

The challenges we all face are significant. The list is long but at the top are the terrible ongoing war and violence in Ukraine, the current war in Iran and the broader hostilities in the Middle East, terrorist activity and growing geopolitical tensions, importantly with China.

The geopolitical backdrop in the Middle East remained tense after renewed threats to Iranian infrastructure from President Donald Trump, although reports of a potential deal could limit the demand for the dollar.

The Bank of Japan's loose monetary policy has turned the yen into the world's cheapest and most reliable funding currency, creating a publicly subsidised funding pipeline for bankers.

"Even before the conflict, I thought recession and risks were on the rise. Recession risks are very high—and unless the hostilities are coming to an end now, I think recession is more than likely by the second half of the year."

behind the recent jump are primarily the weak labour market numbers, but almost all the economic data has turned soft since the end of last year. Total nonfarm payroll employment edged down by 92,000 in February, and the unemployment rate changed little at 4.4 percent.

"The historical evidence reveals a striking pattern: government bonds have repeatedly generated substantial real losses during these extreme episodes. They have even underperformed equities and real estates which are traditionally regarded as risky assets."

The country is almost certain to enter the next shock more indebted than we have ever been before, which may significantly hamper our ability to marshal an appropriate response. The U.S. has never experienced an economic shock as indebted as we are today. This situation leaves the U.S. immensely vulnerable.

The dollar has continued to sink, and top investors in Northern Europe are reportedly re-evaluating their exposure to U.S. assets, while Danish pension funds have already dumped Treasury bonds. Part of that is because of concerns over U.S. debt, but Trump's Greenland crisis and his continued unpredictability have also fueled calls for Europe to weaponize its capital. In fact, European investors own $8 trillion in U.S. stocks and bonds, with $3.6 trillion of that in Treasury debt alone.

For the 25 major episodes going back to 1950, we typically see a decline in the S&P of around 4%. Now, usually after a month, the S&P tends to recover that entire decline. Then he immediately walked it back. The playbook, he said, does not apply here.

I have not touched a paper note for months. I don't even have money to pay for a taxi. Now we walk a lot, for long distances. Palestinians in Gaza use the Israeli currency, the shekel, in their daily transactions, and depend on Israel to supply banks with new banknotes and coins.